Colorado Minimum Wage Increase, Initiative 42 (2006)

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The Colorado Minimum Wage Increase Initiative, also known as Initiative 42, was on the November 7, 2006 ballot in Colorado as an initiated constitutional amendment, where it was approved. The measure increased the minimum wage to $6.85 per hour and provided for it to be adjusted annually based on the Consumer Price Index. The amendment also prohibited more than $3.02 per hour in tip income from being used to offset that minimum wage.[1]

Initiative 42 led to a decline in Colorado's minimum wage on January 1, 2010, from $7.28 to the federal level of $7.25. Colorado is one of 10 states that tie the state's minimum wage level to inflation. Since there was a slight deflation in 2009, the minimum wage in Colorado automatically declined.[2][3]

Election results

Amendment 42
ResultVotesPercentage
Approveda Yes 823,526 53.30%
No721,53046.70%

Election results via:Colorado Secretary of State Elections Department

Text of measure

The language appeared on the ballot as:[1][4]

An amendment to the Colorado constitution concerning the state minimum wage, and, in connection therewith, increasing Colorado's minimum wage to $6.85 per hour, adjusted annually for inflation, and providing that no more than $3.02 per hour in tip income may be used to offset the minimum wage of employees who regularly receive tips.[5]

Constitutional changes

Amendment 42 amended Article XVIII of the Colorado Constitution by adding a new section, Section 15, that says:


Effective January 1, 2007, Colorado's minimum wage shall be increased to $6.85 per hour and shall be adjusted annually for inflation, as measured by the Consumer Price Index used for Colorado. This minimum wage shall be paid to employees who receive the state or federal minimum wage. No more than $3.02 per hour in tip income may be used to offset the minimum wage of employees who regularly receive tips.

Summary and analysis

The Colorado Legislative Council is charged with providing a summary and analysis of each measure on the Colorado ballot. ("The state constitution requires that the nonpartisan research staff of the General Assembly prepare these analyses and distribute them in a ballot information booklet to registered voter households.")

To describe Amendment 42, they said:


What is the minimum wage? The minimum wage is the lowest wage that can be paid to most workers. It was instituted in 1938 by the federal government. Since then, the federal minimum wage has been increased nineteen times, from $0.25 to its current level of $5.15 per hour for most workers and $2.13 per hour for workers that receive tips. It was last increased in 1997.

States can set a higher minimum wage than the federal one. Colorado's minimum wage is currently set at the federal amount of $5.15 per hour. Although federal law also allows cities to enact a higher minimum wage, state law does not allow cities to enact minimum wage laws separate from that of the state.

Which workers typically get paid the minimum wage? Nationally, nearly three-quarters of those paid $5.15 per hour or less work in service jobs, mostly in food preparation and serving. Some workers can be paid less than $5.15 per hour because they receive tips or other compensation in addition to their hourly wage. Also, there are several jobs that are not covered by the minimum wage. The most common of these include certain farm workers, part-time babysitters, some seasonal and recreational employees, newspaper delivery persons, and salespeople who regularly work away from their employer's place of business.

The federal government publishes wage data for workers paid by the hour. This data overstates the number of workers affected by Amendment 42 because it includes workers not covered by minimum wage laws. Also, it understates the earnings of some workers because it does not include tips and other compensation. According to 2005 wage data, about 106,000, or just under 5 percent, of Colorado workers were paid less than $6.85 per hour, the wage rate set in Amendment 42. About 72,000 of these workers were paid between $5.15 and $6.85 per hour, 9,000 were paid $5.15 per hour, and 25,000 were paid less than $5.15 per hour. Many of the workers earning below $5.15 per hour likely received other compensation that pushed their total earnings above $5.15 per hour

How does Amendment 42 change state law? Amendment 42 increases Colorado's minimum wage from $5.15 per hour to $6.85 per hour beginning January 1, 2007. Furthermore, the proposal adjusts the wage by the rate of inflation each year. For workers who regularly receive tips, the minimum wage increases from $2.13 per hour to $3.83 per hour. This wage will adjust each year so that it will always be no more than $3.02 less than that for workers who do not receive tips. For example, if inflation is 3 percent in 2007, in 2008 the minimum wage would increase to $7.06 for most workers and $4.04 for workers who receive tips.

How many states have higher minimum wages than the federal one? As of August 2006, 23 states and the District of Columbia had adopted a minimum wage greater than the federal minimum wage. Of those, four are adjusted annually by the rate of inflation. Washington State has the highest minimum wage. It is currently set at $7.63 per hour and adjusts for inflation each year.

Fiscal impact

See also: Fiscal impact statement

The fiscal estimate provided by the Colorado Legislative Council said:


State spending and revenue. Students employed in work-study positions at state universities and colleges are often paid less than $6.85 per hour. The difference between current student wages and the wages required by Amendment 42 could cost the state up to $2.8 million annually. The actual state cost will depend on the options used by the legislature or schools to address the higher wages, such as providing more state money to the schools, increasing fees or tuition, or reducing the number of work study hours available to students. All other state employees are currently paid above $6.85 per hour. Presently, it is unknown whether Amendment 42 will affect state revenue from income or sales tax collections. Any change in tax revenue cannot be quantified at this time.

Local government impact. The fiscal impact of the amendment on local government has not been estimated, though expenditures would increase for those local governments that currently pay workers at or near the minimum wage. Any change in local tax revenue cannot be quantified at this time.

Support

Supporters

Groups supporting the measure included:

  • Coloradans for a Fair Minimum Wage
  • America Votes For A Fair Minimum Wage
  • Colorado Progressive Action Issue Fund
  • Civic Participation Campaign/Mi Familia Vota Committee For Working Families
  • Bell Ballot Action
  • People For The American Way Voters Alliance of Colorado.

Arguments in favor

Supporters argued that:

  • "Raising the minimum wage ensures that more Coloradans working full-time will earn an income above the poverty level. Currently, a full-time worker earning $5.15 per hour makes about $10,700 a year. Amendment 42 raises this amount by a third, to about $14,250. The annual income considered to be poverty level is $9,800 for a one-person household and $13,200 for a two-person household. Up to an estimated 138,000 Colorado workers could benefit from Amendment 42, including low-income workers earning just above the proposed minimum. Some of these workers' wages are the only source of their family's earnings."[6]
  • "An increase in the minimum wage is overdue. The federal government has not raised the minimum wage for nine years. Each year it becomes more difficult for minimum wage workers to buy necessary goods and services because of the rising cost of living. The buying power of the minimum wage is the lowest it has been for over 50 years. The proposed minimum wage of $6.85 restores the wage to near its average buying power over the last 50 years. Adjusting the wage for inflation guarantees that the wage will not lose its buying power in the future."[6]
  • "Raising the minimum wage could benefit both businesses and workers by increasing worker morale and productivity, as well as reducing turnover and absenteeism. Further, some evidence shows that states that have minimum wages above the federal level have had favorable employment growth, including in industries that typically pay lower wages. This evidence shows that an increase in the minimum wage in these states has benefited low-income workers without harming the economy."[6]

Donors

Campaign cash Campaign Finance Ballotpedia.png
Category:Ballot measure endorsements Support: $1,168,997
Circle thumbs down.png Opposition: $2,545,241
Total: $3,714,238

$1,168,997 was contributed to the campaign in favor of a "yes" vote on Amendment 42.[7]

Significant donors included:

Donor Amount
America Votes for a Fair Minimum Wage $280,000
American Federation of Teachers $200,000
Patricia A. Stryker $150,000
Civic Participation Campaign $150,000
Tim Gill $100,000
New Orleans ACORN Democracy Campaign $34,000
Colorado State Conference of Electrical Workers $25,000
Colorado AFL-CIO $22,442
SEIU $21,375
Colorado Education Association $20,000
Jared Polis $20,000
Ballot Initiative Strategy Center $6,000

Opposition

Opponents

Groups opposing the measure included:

  • Respect Colorado’s Constitution
  • The Hospitality Issue PAC

Arguments against

Opponents argued that:

  • "Raising the minimum wage may hurt the economy. Requiring businesses to increase the pay of non-tipped minimum wage workers by 33 percent and tipped minimum wage workers by 80 percent will push up wages of other workers and increase overall labor costs. Some evidence shows that businesses respond to an increase in the minimum wage by raising prices or by hiring fewer workers, or both. An increase in the minimum wage could be particularly difficult for smaller businesses and restaurants with fewer financial resources. The government does not need to require businesses to pay their workers more; businesses already pay nearly all Colorado workers more than the proposed minimum wage."[6]
  • "Some evidence shows that increases in the minimum wage cause employers to hire fewer less-skilled and inexperienced workers. These workers would then miss the opportunity to earn an income and gain the skills and experience that would allow them to earn higher wages in the future. Also, businesses forced to pay higher wages may offer fewer benefits, raises, and training opportunities. Further, many minimum wage workers do not live in low-income households or earn the minimum wage for long. Instead of increasing the minimum wage for all workers, existing programs and tax benefits can help low-income workers in need."[6]
  • "Since changes to the state constitution require voter approval, putting the minimum wage in the state constitution will make it difficult to respond quickly to future economic and labor conditions. Also, adjusting the minimum wage each year for inflation could contribute to continuing higher prices for Colorado consumers. Further, businesses will be required to pay workers higher wages each year regardless of their qualifications or performance and the financial condition of the business or the economy."[6]

Donors

$2,545,241 was contributed to the campaign in favor of a "no" vote on Amendment 42.[8] Since some of the committees that opposed Amendment 42 also played a role in other ballot measures on the 2006 Colorado ballot, it isn't possible to definitely know how much of the funds they raised went specifically to oppose Amendment 42.

Donors of $50,000 and above were:

Donor Amount
Colorado Restaurant Association $1,448,751
National Restaurant Association $223,000
Broadmoor Hotel $100,000
Harman Management Corp. $62,000
Outback Steakhouse $60,000

2008 lawsuit

In October 2008, a group of restaurateurs from Pueblo, Gunnison, Yuma, Crested Butte, Salida, Sedalia and La Junta filed a lawsuit against the amendment seeking to have it declared unconstitutional and nullified. The basis for their lawsuit was that the language of the amendment linked minimum wage hikes in the state to "the Consumer Price Index used for Colorado." The lawsuit said there "is no CPI 'used for Colorado" but, rather, a CPI for regions, such as a 13-state Western area that included Colorado, and an index for the Denver-Boulder-Greeley area.

Because of this, the lawsuit said there is "no data whatsoever relating to any rural areas of Colorado and no data from any of the areas in Colorado within which plaintiffs' businesses are situated." They also said, "the rate of inflation and cost-of-living is lower in the areas where plaintiffs do business than in the Denver-Boulder- Greeley metropolitan areas."[9]

See also

Colorado
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